Correlation Between ONWARD MEDICAL and WUXI BIOLOGICS

Can any of the company-specific risk be diversified away by investing in both ONWARD MEDICAL and WUXI BIOLOGICS at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining ONWARD MEDICAL and WUXI BIOLOGICS into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between ONWARD MEDICAL BV and WUXI BIOLOGICS UNSPADR2, you can compare the effects of market volatilities on ONWARD MEDICAL and WUXI BIOLOGICS and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in ONWARD MEDICAL with a short position of WUXI BIOLOGICS. Check out your portfolio center. Please also check ongoing floating volatility patterns of ONWARD MEDICAL and WUXI BIOLOGICS.

Diversification Opportunities for ONWARD MEDICAL and WUXI BIOLOGICS

0.08

Correlation Coefficient

ONWARD MEDICAL  WUXI BIOLOGICS

Significant diversification

The 3 months correlation between ONWARD and WUXI is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding ONWARD MEDICAL BV and WUXI BIOLOGICS UNSPADR2 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WUXI BIOLOGICS UNSPADR2 and ONWARD MEDICAL is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on ONWARD MEDICAL BV are associated (or correlated) with WUXI BIOLOGICS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WUXI BIOLOGICS UNSPADR2 has no effect on the direction of ONWARD MEDICAL i.e., ONWARD MEDICAL and WUXI BIOLOGICS go up and down completely randomly.

Pair Corralation between ONWARD MEDICAL and WUXI BIOLOGICS

Assuming the 90 days horizon ONWARD MEDICAL BV is expected to generate 1.24 times more return on investment than WUXI BIOLOGICS. However, ONWARD MEDICAL is 1.24 times more volatile than WUXI BIOLOGICS UNSPADR2. It trades about 0.02 of its potential returns per unit of risk. WUXI BIOLOGICS UNSPADR2 is currently generating about -0.04 per unit of risk. If you would invest  590.00  in ONWARD MEDICAL BV on October 5, 2024 and sell it today you would lose (10.00) from holding ONWARD MEDICAL BV or give up 1.69% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

ONWARD MEDICAL BV  vs.  WUXI BIOLOGICS UNSPADR2

ONWARD MEDICAL BV

Risk-Adjusted Performance

0 of 100

OK

Over the last 90 days ONWARD MEDICAL BV has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly fragile basic indicators, ONWARD MEDICAL reported solid returns over the last few months and may actually be approaching a breakup point.

WUXI BIOLOGICS UNSPADR2

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days WUXI BIOLOGICS UNSPADR2 has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest uncertain performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with ONWARD MEDICAL and WUXI BIOLOGICS

The main advantage of trading using opposite ONWARD MEDICAL and WUXI BIOLOGICS positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ONWARD MEDICAL position performs unexpectedly, WUXI BIOLOGICS can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in WUXI BIOLOGICS will offset losses from the drop in WUXI BIOLOGICS's long position.

The idea behind ONWARD MEDICAL BV and WUXI BIOLOGICS UNSPADR2 pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.